Tuesday, March 19, 2024

Pine seedlings prove profitable

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Five thousand New Zealand small shareholders in ArborGen Holdings can now see some potential return for their perseverance through a decade of research and development expenditure and low share prices.
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The company formerly called Rubicon declared US$3.2 million net profit for the financial year ended March 31, despite a reduction in tree seedling sales during 2020.

Revenue was down 7% to $52.7m because covid restrictions prevented planting.

NZ revenue was $10m and $6m was earned from sales in Brazil.

A majority of nearly 400 million seedling sales annually are made in the United States, where its major shareholders live.

They are chair David Knott with 28% and Ranjan Tandon with 17%, both in New York State.

However, as a result of its troubled past going back to Rubicon, Tenon and Fletcher Challenge, 96% of ArborGen’s shareholders are domiciled in NZ.

Individually they are investors with fewer than 10,000 shares, which at the present price means a stake of $2000 or less.

Auckland-based company secretary Sharon Ludher-Chandra says the holdings of Knott and Tandon are held in NZ registries and therefore counted within the NZ domicile.

Recently, following a sell-down of a 7% stake by US investor Richard Perry, the ArborGen (ARB) share price has risen from 13-19.5c.

ArborGen says it is the world’s largest commercial seedling supplier and a leading source of advanced genetics in the forest industries.

These products enable more consistent yield and quality of wood in a shorter tree growing time.

The company has six forest nurseries in NZ and one in Victoria, and from its operational base in North Carolina utilises eight seedling nurseries and 10 orchards for cones and seeds in the southern and mid-western US.

Most of the US and Brazilian production is loblolly pine and in Australasia it is radiata pine.

Knott reported to shareholders that demand was growing for the highest quality seedlings because of underbuilding, demographic changes, an aging housing stock and wood supply constraints in Canada, the western US and Europe.

Net earnings of $3.2m was a $6m turnaround from the trading loss in FY2020 and directors have forecast an increase in Ebitda this financial year, up from $11m to $13-$14.5m.

ArborGen is expanding its seedling production from mass-control pollination (MCP) of the orchard trees to maximise utilisation of advanced genetics.

The company has an added opportunity to extend proprietary intellectual property into other crop species.

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